468 Retail and Channel Management Blog

Friday, January 30, 2015

Zara: Changing the Fashion Industry


Imagine you wanted to have one of the most successful clothing companies in the world? What if I told you that in order to do so you needed to spend no money on marketing, sell relatively cheap clothes, and offer no products made by renowned designers? As an owner of such a store, I’m sure you would be skeptical of at least some of that advice. 

Interestingly enough, Zara, one of the most successful and profitable clothing retailers, utilizes all aspects of that strategy. What makes Zara so special, and how do they succeed while using such a simple business plan?

Zara is at the forefront of the fashion industry, setting the proverbial pace in terms of trends, turn-around-time and product pricing. In a nutshell, Zara’s retail value proposition consists of offering “trendy and decently made but inexpensive products sold in beautiful, high-end-looking stores.”[1] It is no wonder experts agree that Zara has changed the fashion industry. 


“Fast-Fashion”


Founder, Amancio Ortega was a pioneer in creating “fast fashion”, a type of strategy that gives consumers what they want, when they want it.[1] Clothing trends change very quickly, and so do needs of the consumer. To meet that demand, Zara “essentially imitates the latest fashions” and offers them at a much lower price.[1] Therein lies some of the company’s success, “the customer is always determining production, not the other way around. Every piece of clothing [made] has been requested.”[1] While other companies can only guess the demand of styles and quantity of clothing needed for several months, Zara can be reactive in how they manage these components. 

As a consumer of their clothing, the brand name on the clothing doesn't really matter, but the style does. I think this is key to them being successful. To put it bluntly, they copy the clothing of other retailers. I guess as long as the style and savings are passed on the consumer no one really complains.

How fast can Zara meet demand? After consulting with their design team, and determining trends around the world, Zara is able to bring a new product from the design phase to store shelves in 2-3 weeks. Traditional retailers and designers create “products they believe are going to be trending 12-months out” and the turnaround for getting clothes on the shelf can range from 2-4 months.[2] Much of this quick turn-around-time can be attributed to the in-house design, production and distribution channels, areas for which Zara does not need to depend on third-party companies. 


Location, Location, Location

Despite their large success, Zara surprisingly spends no money on advertising. Taking after their founder who has never given an interview, Zara “hardly has a marketing department, and it doesn’t engage in flashy campaigns.”[3] Even their designers remain anonymous.  

The marketing Zara does do is all about real estate. The company “invests heavily in the beauty, historical appeal and location of its shops.”[3] For example, Zara purchase a store in New York, paying $324 million for the location, the most expensive ever sold in Manhattan. This area is heavily traveled, and is surrounded by luxury clothing retailers. Zara is not intimidated by these retailers, rather, it encourages consumers to compare. Offering a similar looking product with a lower price tag has paid off significantly in such situations. As one expert puts it, “the retail strategy for luxury brands is to try to keep as far away from the likes of Zara. Zara’s strategy is to get as close to them as possible.”[1] Both the stores in WEM and Southgate also have a very elegant and clean look, which adds to the appeal of being in the store and looking around. I find myself browsing for at least 20 minutes in every corner of the store for any new and trendy additions.

Another appealing feature of the Zara brand is its unique clothing. Stores in each part of the world design different trends and clothing. Additionally, the clothes are produced in small quantities and don’t last on the shelves for more than a couple of weeks. When buying clothing from Gucci or Prada, “you knew the chances were good that clothes would still be there [later], with Zara…You buy it now or never.” [1] Considering that their prices are so low, most of the time you buy it. This strategy encourages consumers to always check their stores, and also means the shopper gets an item that may be unique. 

Personally, more than half my wardrobe is from Zara. The main reasons I buy my clothing there is the price of the products and stylish clothing. Although I know that the clothing quality is not as high as in other stores, the price of the clothes more than makes up for that.

Whereas Zara was working hard to keep up with luxury brands, it seems as though they are now the ones trying to keep up with Zara. 

Zara has really changed the fashion industry. 


References

1. http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=all&_r=1&

2. http://www.businessinsider.com/zaras-genius-business-model-and-retail-2013-11

3. http://adage.com/article/cmo-strategy/zara-grew-a-multi-billion-dollar-brand-sans-ads/243730/

4. http://www.forbes.com/sites/walterloeb/2013/10/14/zaras-secret-to-success-the-new-science-of-retailing-a-must-read/

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